Tesla's Encouraging Sales to Benefit Taiwanese Parts Suppliers

Driven by eye-catching sales announced by Tesla Motors Inc., the U.S.-based leading maker of premium electric cars, and the firm's announcement to venture into the Chinese market, several key-parts suppliers to Tesla in Taiwan are expected to enjoy clear sales gains this year.

Global sales of Tesla's Model S premium electric cars are expected to grow by 55% to some 35,000 units or even more; while the American electric vehicle (EV) maker is scheduled to launch the new Model X electric SUV in mid-2014, which, according to industry sources, is expected to further boost Tesla's annual sales volume to 50,000 to 60,000 units.

Tesla is also expected to enjoy smooth sales in China, the world's largest automobile market especially focusing on solving air-pollution issues in recent years. China is providing the highest subsidy to EV purchases, and both the government and the private sector have been aggressively developing the EV industry.

In fact, industry insiders said, Tesla has been informing its parts suppliers about possible increase in order volume since Q4, 2013, and some Taiwanese suppliers' weekly supply volumes have risen from less than 500 sets to about 800 now. In Q4, 2013, Tesla sold better-than-expected 6,900 units, and the company has asked suppliers to elevate the weekly supply volume to 1,000 sets from February 2014.

Initially Tesla was rebuffed by many international parts suppliers due to low order volume, forcing the maker to turn to Taiwanese suppliers, who are known for being willing to fill small, large-variety orders.

Some institutional investors say that Tesla enjoys rapid growth in sales volume that is set to remain modest in the next two years. In 2013, Tesla sold about 22,000 electric cars mainly in the U.S., so its parts order volume is relatively limited.

Quoting Hota Industrial Manufacturing Co., Ltd., the sole supplier of speed-reduction gearboxes to Tesla, institutional investors said, the American EV maker is not in Hota's top-10 customer list. Basically, Hota's major revenue sources come from big international clients such as BorgWarner, Punch, Easton, BRP and EF. The Taiwanese company has also tapped into Toyota U.S. and AGCO (world's top-three agriculture machinery equipment maker)'s supply chains.